Industry

I INTRODUCTION

Industry, the long-term changes in types and distribution of global economic activity. In everyday usage, the term “industry” refers to large manufacturing companies, such as the big multinational car companies. In this article a broader definition of industry will be used, which includes all economic activities, in all sectors, and groups them into three broad categories; primary, secondary, and tertiary.

II TYPES OF INDUSTRY

A Primary Industries

These are the industries responsible for the extraction of natural resources. They comprise agriculture, hunting, fisheries, forestry, mining, and quarrying. A distinction is often drawn between those primary industries concerned with renewable resources such as forests and those concerned with non-renewable ones, such as minerals.

B Secondary Industries

Secondary industries engage in the manufacturing and production of goods. The word “secondary” implies that such companies are engaged in the second stage of economic activity. They use the natural resources of the primary industries (and possibly the goods of other secondary industries) to make products. Secondary industries include house-building and the manufacture of clothes, food processing, shoes, luggage, furniture, packaging, chemicals, metal products, machinery, electrical products, electronic products, computers, cars, trains, and aeroplanes. They also include utilities, which provide services such as gas, water, and electricity.

C Tertiary Industries

Tertiary industries comprise those companies involved in services, as opposed to those providing an extractive or manufacturing function. The tertiary category includes retailers (of clothes, food, and so on), banks, insurance companies, hotels, restaurants, estate agents, lawyers, doctors, accountants, teachers, golf professionals, and television presenters.

Although the word “tertiary” might be thought to imply that these industries have developed recently (for example, computer programming), this is not necessarily the case. Food-sellers fall into the tertiary category, but people have sold food in markets for thousands of years. This example highlights another point. There are many industries for which the distinction between primary and secondary, or between secondary and tertiary, is difficult to make. A food-seller may be a market trader who purchases fish from a fisherman. In this case, he or she would be classed as tertiary. Alternatively, the fisherman may have walked from the beach into the market and sold the fish directly to a customer. This second example shows how different stages of the production process may be performed by the same people. To take another example, many oil companies own oil rigs, petrochemical plants, and garage retail outlets. In such cases, it is difficult to say whether this industrial activity is primary, secondary, or tertiary.

The contrast between primary, secondary, and tertiary industries can also be seen at the country level. Advanced economies such as the United Kingdom have a mix of industries, primary, secondary, and tertiary, but with an overwhelming emphasis on the tertiary sector. In contrast, many poorer nations still depend for their livelihoods on primary industries such as minerals or agriculture.

III HISTORICAL DEVELOPMENTS

The first stages of the Industrial Revolution occurred in the middle of the 18th century with the early development of the steam engine and textiles manufacturer. At this stage, development was largely confined to Britain. The second phase of the Industrial Revolution began in the 19th century, as new industries were created with the development of steel manufacture and the expansion of the railway system. Development also occurred geographically with the spread of these industries across Europe, and especially in Germany, and across the Atlantic to the United States. By the end of the 19th century new industries were opening up in many areas: for example, the production of telephone equipment and domestic electric lighting.

RELATED ARTICLES:  Business Cycle

The next phase of the Industrial Revolution gathered pace in the last two decades of the 19th century, with the expansion of electric power, the chemical industry, the motor industry, and assembly-line production. It was during the final decades of the 19th century and the early decades of the 20th that the process of industrialization intensified, in terms of the number of industries and the number of countries involved. Between 1880 and 1930 the broad sweep of industrialization included the manufacture of the motor car and its related equipment such as tyres, radio equipment, aircraft, plastics, and stainless steel, and the appearance of the earliest television service.

Even the Great Depression of the 1930s failed to prevent continued industrial development. The Depression era saw expansion in new industries such as the manufacture of petrochemicals, of penicillin and other pharmaceuticals, and of nylon and polyesters. After the Depression, the older-established industries resumed their growth.

IV RECENT TRENDS

Since World War II the existing industries in the developed world have become much more sophisticated in their products and their manufacturing processes. Miniaturization is only one aspect of this sophistication. At the same time, new technologies have encouraged the creation of many new industries, including jet aircraft, computers and electronics in general, satellites, nuclear power, new composite materials, carbon fibre, robotics, telecommunications, and data-processing equipment.

In the latter half of the 20th century, there have been continued developments in manufacturing, but also a shift in employment in the advanced economies away from secondary and towards tertiary activities. Higher levels of wealth in the developed world have encouraged the growth of many service industries, such as retailing, the hotel business, tourism and leisure services, and financial and business services.

Over the past 20 years, the most advanced economies have been forced to re-evaluate their position in the face of competition from newly industrializing economies. Many of the so-called Asian Tiger economies such as Hong Kong S. A. R., Malaysia, and Singapore, recorded rates of economic growth that were two or three times those of developed countries over the decade 1985-1995.

However, this does not mean that competition from the developing world is responsible for unemployment in the developed world. Many of the developing nations now have an advantage in certain sectors, but countries such as the United Kingdom, the United States, and Japan also possess advantages in many other more advanced sectors. Similarly, the impact of new technology on employment in the developed world is not necessarily negative. The two countries that have invested most in new technology since 1985 are the United States and Japan, which in the mid-1990s had the lowest unemployment rates of the major economies.

Many traditional manufacturing sectors (for example, steel-making) have seen declining employment in the advanced nations while new high-technology industries have expanded. Some of the newer industries have included information technology, cellular radio, biotechnology, and global finance.

V GLOBALIZATION

Globalization, or the internationalization of production, technology, enterprise, and exchange, means different things to different people. The number of television sets in the world increased from under 200 million in the early 1960s to over 1 billion in the early 1990s. Supermarkets and high-street shops are full of food products from across the globe. Retailers stock the latest designer labels, appealing to people of the same age and income groups all around the world.

For families, one of the clearest expressions of globalization is the onward march of American films and television shows, satellite television, and multimedia software. More generally, globalization is powerfully advanced for families to increased foreign travel, in terms of both the number of visits and the opening up of new long-haul destinations. The number of passenger-miles travelled doubled over the decade up to 1996. The development of the Internet has massively extended the ability of households to reach out across the globe in search of new information and opportunities.

RELATED ARTICLES:  Investment

For businesses, technological improvements in transport and communications have opened up a new world of opportunities. An illustration of the surge in activity can be seen in the following numerical example. If world trade, output, and foreign direct investment are indexed at 100 in 1970, then by 1993 the output index had reached 180, the trade index 300, and the foreign investment index 550. As a result of these changes, and helping to stimulate them, world currency market turnover is now over $1,000 billion per day.

The growth in world trade and investment has stimulated the growth of multinational corporations. Some of these companies are now economically more powerful than many countries. Seven influences can be identified as driving globalization. They are increasing global wealth; the removal of trade barriers; the fall of communism; transport and communication developments; company restructuring; the globalization of financial markets; and cultural convergence, epitomized in the development of worldwide brands.

However, the trends are not all towards globalization. There are a number of factors that could, at the very least, slow or possibly even reverse the globalization process. There are many aspects to our culture that strongly suggest a reluctance to “go global”. The arguments in Britain over the country’s future role in the European Union clearly highlight differences in culture and national outlooks that are of great importance to companies. Where possible, many companies will attempt to offer their goods or services to a global market, but in many instances, these will need to be tailored to local demands and tastes. There is also the possibility that certain goods and services will have no appeal to other nations. This could be a result of, for example, the contrasting cultures of Western and Islamic nations.

VI FUTURE PROSPECTS

The 1990s may be the most significant of the century for growth in world trade. Much of the 20th century has been characterized by war, the threat of war, or economic depression. In contrast, in the 1990s there has been the completion of the fall of communism and the Uruguay round of GATT talks on free trade. This ended with the formation of the World Trade Organization, a development that should provide encouragement to future trade in goods and services.

What is unique about the most recent developments is the speed and intensity of change. Across the globe, larger and larger countries are industrializing and they are doing so at a faster rate. To take but a few examples, China maintained economic growth rates of 10 per cent per annum over the decade to 1996. If these rates of growth were to be maintained, then China would overtake the United States as the largest economy in the world before 2021. Moreover, countries such as India, South Korea, and Indonesia could also grow to join the ranks of the largest economies. However, in order to predict the identities of the future largest economies, many factors need to be considered—it is not enough simply to extrapolate present-day trends.

Contributed By:
Graeme Leach